OTC Markets Group Inc (OTCM) Q2 2024 Earnings Call Highlights: Navigating Growth and Challenges

In This Article:

  • Gross Revenue: $27.6 million, up 1% year-over-year.

  • OTC Link Revenue: Increased 12%, representing 20% of gross revenues.

  • Market Data Licensing Revenue: Increased 1%, contributing 39% of gross revenues.

  • Corporate Services Revenue: Decreased 3%, comprising 41% of gross revenues.

  • Operating Expenses: Increased 1% quarter-over-quarter.

  • Operating Profit Margin: 30.4%, down from 31.4% in the prior year quarter.

  • Adjusted EBITDA: $10.3 million, down 1% year-over-year.

  • Adjusted Diluted Earnings Per Share: $0.85, down 1% year-over-year.

  • Cash Provided by Operating Activities: $6.2 million, up from $4.7 million in the prior year quarter.

  • Free Cash Flow: $5.5 million, up from $4.4 million in the prior year quarter.

  • Dividends Returned to Investors: $2.2 million, compared to $2.1 million in the prior year quarter.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • OTC Link experienced a significant growth of 12% during the quarter, driven by increased trading volume.

  • The company announced the launch of OTC Overnight, which will allow trading in OTC equity securities during Asian market hours, potentially expanding market reach.

  • Revenues from Blue Sky data products increased by 35%, indicating strong growth in this area.

  • The company maintained a strong operating profit margin of over 30%, showcasing efficient cost management.

  • A quarterly dividend of 18 cents per share was declared, reflecting a commitment to providing shareholder returns.

Negative Points

  • Corporate Services revenue decreased by 3% in the second quarter, with a notable decline in OTCQB and DNS revenues.

  • The number of OTCQB companies decreased by 9%, indicating challenges in retaining smaller financially stressed companies.

  • Revenues from EDGAR Online decreased by 22% due to subscriber cancellations, highlighting integration challenges.

  • Operating expenses increased by 1%, with a significant 50% rise in general, administrative, and other costs.

  • Income from operations and net income both declined by 2% and 3% respectively, indicating pressure on profitability.

Q & A Highlights

Q: With the closing auction and overnight trading products coming online, can you discuss the process of bringing new technology functions into the product suite? A: Cromwell Coulson, President and CEO, explained that product development can stem from internal ideas or subscriber feedback. The process varies depending on whether it's an incremental improvement or a larger initiative. Some products, like the Link messaging product, have quick uptake, while others, like the ECN, require a longer development period. The focus is on solving client problems and adding value through technology.